BUAD 470 - Managing Quality and Operations
Final Preparation Guide
1. Key concepts of Chapter 8 – Facility Location
a. Objectives of locations decisions
b. Factors that influence location decisions, and how?
c. Comparison of service and manufacturing Considerations
d. Cost-Profit-Volume Analysis
e. Center of gravity method
2. Key concepts of Chapter 6S – Linear Programming
a. Components of a LP
i. Decision variables
ii. Objective function (either max or min) & formulated in terms of
decision variables
iii. Constraints (>=, <=, or =) and expressed in terms of decision
variables
b. LP formulation: focus on the following 3 classes of problems
i. Product mix
ii. Transportation problem
iii. Assignment problem
c. A LP can have only 3 possible outcomes
i. Either it has an optimal solution, or
ii. It is infeasible, (when is a transportation problem infeasible?), or
iii. It is unbounded
3. Key concepts of Chapter 11 – Inventory Management
a. Types of inventory (you may be asked for examples in a specific scenario,
for example a hospital)
b. Functions of inventory
c. Objective of inventory control
d. EOQ model
i. Assumptions of EOQ model
ii. Understanding and ability to calculate (refer to in-class examples
of lecture #4 and #5)
1. holding cost
2. ordering cost
3. when holding cost = ordering cost => EOQ
4. length of order cycle
5. number of orders per year
6. lead time
7. reorder point
8. illustration of order cycles in a graph
iii. Understanding safety stock and its function
e. EPQ model
i. Assumptions of EPQ model
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ii. Ability to calculate economic run size (refer to in-class example of
lecture #5)
4. Key concepts of Chapter 17 – Project Management
a. Characteristics of a project
b. How is project management different from operations scheduling?
c. Key performance metrics of project management
d. Key responsibilities of a project manager
e. Understanding and ability to represent/calculate
i. Project network diagrams
ii. AOA representation
iii. AON representation
iv. Critical path and its significance
v. Critical activities
vi. Slack activities
vii. Expected project duration
Practice Problems
1. Please review all homework questions and problems very
carefully.
2. A location analysis has been narrowed down to three locations. The critical
factors, their weights, and the ratings for each location are shown below:
Factor
Wt.
Location
A
B
C
Labor Cost
.4
70
80
90
Transp. Cost
.2
80
80
60
Market Access
.2
90
70
60
Raw Mat'l. Access
.1
50
70
90
Utility Cost
.1
80
90
70
What is the composite score for location A?
Answer: 0.4(70) + 0.2(80) + 0.2(90) + 0.1(50) +0.1(80) = 75
3. Weekly shipments to each warehouse will be: WH1, 100; WH2, 150; WH3, 120;
WH4, 150; and WH5, 120. What is the optimal location of the distribution center?
Location
1
2
3
4
5
(X,Y)
2,3
3,7
5,5
7,3
8,7
2
Answer: Straight-forward application of center-of-gravity method. Verify that the correct
answer is (5.1, 5.1).
4. A meat packing plant produces 480 hams, 400 pork bellies and 230 picnic hams
everyday. Each of these products can be sold either fresh or smoked. The total
number of hams, bellies and picnics that can be smoked during a normal working
day is 420. In addition, up to 250 products can be smoked on overtime at a higher
cost. The net profits are as shown in Table 1 as follows:
For example, the schedule shown in Table 2 yields a total profit of $9,965. The objective
is to find the schedule that maximizes the total net profit. Formulate the problem as a
linear program.
Solution: Defining variables are tabulated below.
Max
Hams
Fresh
x1
Smocked - Regular
x2
Smocked – Overtime
x3
Bellies
y1
y2
y3
Picnics
z1
z2
z3
8x1  14 x2  11x3  4 y1  12 y2  7 y3  8z1  13z2  9 z3
S.t.
3
x1  x 2  x3  480
y1  y 2  y 3  400
z1  z 2  z 3  230
x 2  y 2  z 2  420
x3  y 3  z 3  250
x1 , x 2 , x3 ,  0
y1 , y 2 , y 3 ,  0
z1 , z 2 , z 3 ,  0
5. For the constraints given below, which point is in the feasible solution space of this
maximization problem?
(1) 14x + 6y  42
(2) x - y  3
A) x = 1, y = 5
B) x = 2, y = 1
C) x = 2, y = 8
Solution: Plug all the values of x and y one by one in the two constraints and find out
the one which does not violate the constraints. The correct answer is B.
6. A service garage uses 120 boxes of cleaning cloths a year. The boxes cost $6 each.
Ordering cost is $3 and holding cost is 10 percent of purchase cost per unit on an
annual basis.
Determine:
A) The economic order quantity
B) The total cost of carrying the cloths (excluding purchase price)
C) The average inventory
Answer:
D = 120 boxes per year
S = $3
H = .10($6) = $0.60 per box-year
A) Qo  2DS/H  2(120)( 3) / .60  35
Qo
D
35
120
H
S  (.60) 
(3)  10.50  10.29  $20.79
2
Qo
2
35
Qo 35
C) Average inventory 

 17.5 boxes
2
2
B) TC 
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7. A shop that makes candles offers a scented candle, which has a monthly demand
of 360 boxes. Candles can be produced at a rate of 36 boxes per day. The shop
operates 20 days a month. Assume that demand is uniform throughout the month.
Setup cost is $60 for a run, and holding cost is $2 per box on a monthly basis.
Determine the economic run size.
Answer:
D = 360 boxes per month
S = $60
H = $2 per box per month
p = 36 boxes per day
720 boxes per month
u = 18 boxes per day
Straight-forward application of the EPQ model. Verify that the correct answer is 208
boxes.
8. Using the information in the table below, do the following:
A) Draw the A-O-A network diagram.
B) Identify the critical path.
C) Determine expected project duration.
Activity
Precedes
Duration
Start
a,b,c,
a
d
5
d
f
6
f
g
2
b
e
5
e
f
9
c
h
4
h
g,i
6
g
end
3
i
end
1
Answer:
A) Refer to the diagram above.
B) The critical path is b-e-f-g.
C) Expected project duration is 19 weeks.
Note: you may be asked to calculate the slack of slack activities for such a question.
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